Derrick was in an automobile accident while he was going to work. The doctor advised him to stay home for eight months due to his physical injuries. The resulting lawsuit was settled and Derrick received the following amounts:
Compensatory damages for physical injury $80,000
Punitive damages 95,000
How much of the settlement must Derrick include in ordinary income on his tax return?
A) $-0-
B) $80,000
C) $95,000
D) $175,000
Answer: C
Tax
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